Ovitz’s Elitism Irritated Colleagues, Eisner Says

Walt Disney Co. Chief Executive Michael Eisner on Tuesday honed his attack on the man he envisioned as his successor, calling Michael Ovitz an elitist whose management style “started to rub people the wrong way” soon after he was hired in 1995.

Eisner recalled a retreat at Walt Disney World in January 1996 when he and 200 other executives toured the 30,000-acre theme park in buses. Ovitz, he said, opted to ride in his own chauffeur-driven limousine.

“The bus was good enough for all the managers,” Eisner said, not to mention “for Walt Disney in his day.” He said Ovitz’s decision to set himself apart sparked the ire of his fellow executives as well as park employees.

The perception was that Ovitz was “a little elitist for the egalitarian Walt Disney World cast members in Florida. And I got a lot of complaints,” Eisner said. “It was a bad vibe, let’s put it that way.”

Eisner’s comments came during his second day of testimony in Delaware Chancery Court, where shareholders have filed suit alleging that Disney directors mishandled the hiring of Ovitz and his firing 15 months later.

In seven hours on the stand, Eisner portrayed Ovitz as a once charismatic executive whose arrogant and abrasive behavior made it impossible for him to be accepted as an effective leader at Disney.

“Every day,” Eisner said, “I was trying to manage Michael Ovitz. I did little else.”

Eisner’s testimony came in response to questions from his own attorney, Gary Naftalis. The chief executive, who has said he will retire when his contract expires in September 2006, is sure to face a more rigorous examination by the plaintiffs’ lawyers, who are seeking to recoup $200 million -- the value they place on Ovitz’s stock-and-severance package, plus interest. That cross-examination could begin later this week.

In his fullest public account of what he called Ovitz’s “downward spiral,” Eisner was careful to temper his criticisms. In keeping with a defense strategy, Eisner sought to show that although Ovitz failed in the job, he did nothing so egregious as to give Disney legal grounds to deny him his severance.

At one point, Eisner downplayed a rambling, undelivered letter he wrote to Ovitz raising questions about his truthfulness. Eisner called the letter a “bad attempt at 3 a.m. to conjure up a legal brief on why he should leave.” He described it as “silly hyperbole” and “insensitive.”

Speaking in a calm, deliberate tone, Eisner described Ovitz as an intelligent executive whose formidable reputation may have raised hopes too high. In his previous role at Creative Artists Agency, Ovitz was widely regarded as Hollywood’s top deal maker. When Disney hired him, the media and Wall Street hailed it as a coup, Eisner said.

“Everyone was expecting him to hit it out of the park every time he came to the plate,” Eisner said, “and it wasn’t even the same park. It was very tough on him. I had sympathy for him, and still do.”

Eisner praised Ovitz for, among other things, suggesting a key design change in the location of the entrance to the theme park California Adventure, placing it opposite the main gate at Disneyland.

“He was right,” Eisner said. “To this day I’m thankful we redid it.”

Eisner said his doubts about Ovitz surfaced in spring 1996, when he told an inner circle of board members that “the honeymoon was over.”

Soon after, in May, Eisner said he became concerned about Ovitz’s emotional stability after a “bizarre” conversation over dinner. Eisner said Ovitz appeared obsessed with the suicide of Adm. Jeremy M. Boorda, who had shot himself after it was alleged that he wore unearned combat decorations.

He seemed unusually preoccupied with the fact that “the tremendous career of this man had ended in shame,” Eisner said.

On another occasion, Eisner said, Ovitz became “unbelievably upset” when he was not allowed to cut a ribbon at a new Disney store in Manhattan. “Everybody hates me,” Eisner recalled Ovitz telling him.

A “final straw,” Eisner said, came in August 1996 when Ovitz made a “giant scene” outside Eisner’s mother’s funeral in New York. Eisner said he was told of an Ovitz outburst when the hearse carrying Margaret Eisner’s coffin was blocked in Fifth Avenue traffic.

The incident prompted Eisner to tell former directors Irwin Russell and Ray Watson that he had deepening concerns about Ovitz, he recalled. “I just thought I have to inform somebody that this cannot be my replacement,” Eisner said.

Ultimately, Eisner said, Ovitz confided in him that he was not good at being an understudy.

“He told me that he had a hard time thinking that he wasn’t the boss,” Eisner said. “Of course, I would say, ‘You are the boss of 99,999 people. You’re just not the boss of one.’ He told me he just had a really difficult time being No. 2 and he knew he was not handling it well.”

As for the handsome payout Ovitz collected on the way out the door -- a provision included in his contract -- Eisner said the company had no lawful grounds to deny it. “I checked with almost anyone I could find that had a legal degree....That was a dead end from day one.

“I didn’t think he had done the job that would warrant that payment. It was aggravating, annoying and upsetting.”

Eisner suggested that the tumult that led to the acrimonious parting was one of the greatest disappointments of his career.

“My two biggest personnel mistakes were Michael Ovitz and Mo Vaughn,” Eisner said, referring to the highly compensated but underachieving ex-first baseman for the Anaheim Angels, formerly owned by Disney.

Ovitz declined to comment Tuesday.

Eisner said the board of directors had been solidly behind the hiring and had been fully briefed before Ovitz was brought into the Disney fold, despite shareholder allegations that the appointment was simply rubber-stamped. Phone logs introduced into evidence showed that Eisner had informed each board member of his choice the weekend before Ovitz’s hiring was announced.

Eisner said he made it clear to Ovitz that the hiring was subject to approval by Disney’s board and by its compensation committee.

Nothing, Eisner said, could pull Ovitz out of his tailspin.

Eisner said he ultimately briefed directors on his problems with Ovitz in November 1996 and called them individually before Ovitz was fired Dec. 12. It seemed only Ovitz didn’t see the inevitability of his departure.

“I was talking to Michael Ovitz about leaving, and it was as though I was talking about the weather,” Eisner said. “I couldn’t get him to address it. It was unbelievable frustration.”